Call Option
In short
The right to buy a stock at a fixed price before expiration
A call option is like a coupon that lets you buy a stock at today's price even in the future. If the stock rises, you profit. If it falls, you only lose what you paid for the coupon (the premium).
A call option grants the holder the right (not obligation) to buy 100 shares of the underlying at the strike price before expiration. Calls gain value when the underlying rises. Used for bullish speculation, hedging short positions, and covered call strategies.
Formula
Call Profit = max(0, Stock Price - Strike) - Premium PaidRelated concepts
- Put Option — A put option is like insurance for your stocks. If you own shares and buy a put, you can sell them at the strike price even if the stock crashes. You pay a premium for this protection.
- Delta — If a call has delta of 0.5, it gains $0.50 for every $1 the stock rises. Delta 1.0 means the option moves dollar-for-dollar with the stock. At-the-money options typically have delta near 0.5.
- Strike Price — The strike price is the agreed price in the option contract. For a call, you can buy the stock at the strike. For a put, you can sell at the strike. Choose your strike based on how big a move you expect.
- Covered Call — You own 100 shares of Apple and sell someone the right to buy them at $200. They pay you $5 per share ($500). If Apple stays below $200, you keep the $500. If it rises above $200, you sell your shares at that price.